Gujarat High Court
Gray Parikh Architects Private Limited vs Gujarat National Law University on 22 April, 2016
Author: Akil Kureshi
Bench: Akil Kureshi
O/IAAP/10/2016 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
PETN. UNDER ARBITRATION ACT NO. 10 of 2016
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE AKIL KURESHI
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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GRAY PARIKH ARCHITECTS PRIVATE LIMITED....Petitioner(s)
Versus
GUJARAT NATIONAL LAW UNIVERSITY....Respondent(s)
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Appearance:
MR SHALIN MEHTA SR ADVOCATE WITH MR TANVISH BHATT WITH MR
JAY KANSARA AND MR RAHUL DEV FOR M/S WADIAGHANDY & CO,
ADVOCATE for the Petitioner(s) No. 1
MS DHARMISHTA RAVAL, ADVOCATE for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
Date : 22/04/2016
ORAL JUDGMENT
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1. The petitioner is a private limited company rendering services of architectural and interior designing. The petitioner was engaged by the respondent Gujarat National Law University ("GNLU" for short) for rendering such services under an agreement dated 13.5.2008. This agreement contained arbitration clause in the following terms :
"All disputes or differences which may arise between the client and the architect under "Conditions of Engagement and Scale of Charges" with regard to the meaning or interpretation or matter or things done or to be done in pursuance hereof, such disputes and differences shall be referred for arbitration of the Council of Architecture. The decision and award of the arbitrator shall be final and binding on the Architect and the client.
This letter of appointment together with Conditions of Engagement and Scale of Charges of Council of Architecture, as appended herewith shall govern the agreement. This letter is being sent in duplicate. One copy may please be signed in token of your acceptance and returned to us."
2. Case of the petitioner is that the petitioner had rendered such services to the respondent as per the agreement, however, full payments were not made. Relations between the parties sored and several disputes surfaced. It appears that at one stage, both the sides decided to resolve the issues amicably. An agreement was signed by both the sides on 4.7.2012, copy of which is produced by respondent at AnnexureR1 (page62). The said agreement contained following terms :
Page 2 of 11HC-NIC Page 2 of 11 Created On Thu Apr 28 00:44:56 IST 2016 O/IAAP/10/2016 JUDGMENT "2. We agree to short close the contracts for comprehensive Architectural Services (dated 13/05/2008) and for interior designing (dated 01/06/2010) entered into between us.
GNLU shall not copy, use, exploit or in any other manner deal with GPA drawings and/or designs either in part or full for GNLU campus situated at Koba or any other site or project.
3. GNLU will pay Rs 51 lakh as full and final payments towards all contract, expectation, commitment between GNLU and the GPA.
GNLU will pay the first installment of 66.67% of the payable amount (amounting Rs.34 lakhs) within five working days from the date of signing of this agreement which is in full and final settlement of both the contracts referred above and is willingly agreed by both the parties that there are no further liabilities due on the part of any of the parties hereto towards any of the contracts, sub contracts, and assignments there under, absolving both the parties from all liabilities towards each other.
4 GNLU will pay the second installment of the 33.33% of the payable amount (amounting to Rs 17 lakhs) within 15 working days of all the required mandatory detailed drawings, designs and any ancillary information that forms an integral part of the comprehensive architectural services for the campus development, including suggestions towards the rectification measures in form of drawings, designs, site visits and such other services, which the GNLU can expect legitimately from the GPA as part of the comprehensive architectural services covered and helping/guiding GNLU in solving lacunas/defects,if any.
5. Both the parties to this agreement willingly declare and agree that all the grievances and complaints, if any, in whatever form and before whatever forum, with reference Page 3 of 11 HC-NIC Page 3 of 11 Created On Thu Apr 28 00:44:56 IST 2016 O/IAAP/10/2016 JUDGMENT to contracts referred to above will be deemed to have been put an end to and closed for all time to come.
6 GNLU will issue completion certificate for the works completed by GPA in the appropriate format upon making payment of the second installment."
3. It appears the said agreement did not resolve the disputes and the petitioner therefore, issued a notice to GNLU on 22.6.2015 and raised a demand of Rs. 4.03 crores (rounded off) on various grounds.
4. Case of the petitioner is that this agreement was never acted by GNLU. No payment, as promised, was made. The petitioner thereupon approached the Council of Architecture under letter dated 14.9.2015 requesting for taking up arbitral proceedings between the petitioner and the respondent GNLU. In reply to such letter, Council for Architecture under letter dated 30.9.2015 conveyed as under :
"In this regard is informed that the Council cannot undertake Arbitration in the matter due to following reasons :
(i) A suo motu case of alleged professional misconduct is pending against you client (Ms Gauri Parikh) for this very project as she has not charged the fees as per the scale of fees prescribed by the Council.
(ii) The agreement/contract is not as per the COA norms
(iii) Thirdly, before nominating the Council as Arbitrator its consent was not taken.Page 4 of 11
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(iv) As per the provisions of the Architects Act, 1972, only an architect registered with the Council or a partnership firm of architect can use the title and style of architect for practicing the profession of an architect and Companies and LLPs are not allowed.
Thus. M/s. Gray Parikh Architects Pvt. Ltd i.e. a private ltd. company has been set up in violation of the Sections 35, 36 and 37 of the Architects Act, 1972."
5. Thus when the request of the petitioner for taking up arbitral proceedings was declined by the Council of Architecture, the petitioner filed this petition seeking appointment of an arbitrator in terms of section 11 of the Arbitration and Conciliation Act, 1996.
6. In response to the notice issued, the respondent has appeared and filed reply. Through such reply and oral arguments, counsel for GNLU opposed the petition on the following grounds :
1) The arbitration clause in the original agreement envisaged arbitration only by the Council of Architecture.
When the Council declined to undertake such arbitration, no independent arbitrator can be appointed since GNLU never agreed to arbitral proceedings by anyone other than the Council of Architecture.
2) A full and final settlement agreement executed by the parties on 4.7.2012. GNLU had forwarded a cheque of Rs. 51 lakhs as envisaged in the said agreement. The petitioner did not accept the payment. It is now not open for the petitioner to seek arbitration.
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O/IAAP/10/2016 JUDGMENT
3) This agreement dated 4.7.2012 was in the nature of
novatio to the original agreement. This agreement of 4.7.2012 did not contain an arbitration clause.
4) Even otherwise, the petitioner has no case for any recovery against GNLU. The legal notice dated 22.6.2015 discloses no basis for the claim of Rs.4.03 crores (rounded off) raised by the petitioner against GNLU.
5) Counsel relied on the following decisions of Supreme Court :
1) Walter Bau AG Legal Successor of the Original Contractor, Dyckerhoff and Widmann A.G. v. Municipal Corporation of Greater Mumbai and another reported in (2015) 3 Supreme Court Cases 800
2) Larsen and Toubro Limited v. Mohan Lal Harbans Lal Bhayana reported in (2015) 2 Supreme Court Cases
461.
7. Learned counsel for the petitioner submitted that :
1) Admittedly there was an arbitration clause in the agreement between the parties. As per the said clause, the petitioner had approached the Council of Architecture who had erroneously declined to undertake the arbitration. In terms of section 11(6) of the Act, it would be open for the Chief Justice or his designate to appoint an arbitrator since there was clear intention of the parties to resort to Page 6 of 11 HC-NIC Page 6 of 11 Created On Thu Apr 28 00:44:56 IST 2016 O/IAAP/10/2016 JUDGMENT arbitration in case disputes arose instead of resorting to Court proceedings.
2) The agreement dated 4.7.2012 never saw the light of the day. It was never acted upon by either side.
Significantly, GNLU made no payments. Though sum of Rs.51 lacs was to be paid under the said agreement within short time, having failed to make such payment at the relevant time, GNLU cannot bind the petitioner to such an agreement more than three years later by offering the said amount. My attention was drawn to a handwritten comment on the side of the agreement clause(2) in which it was remarked by the authority of GNLU that such terms needed reworking. This according to the counsel would suggest that the agreement remained at a draft stage.
8. Facts are not seriously in dispute. The petitioner and the respondents had entered into an agreement which contained an arbitration clause envisaging arbitration by the Council of Architecture. When the petitioner applied for such arbitration, Council refused the request on the grounds that a case of professional misconduct was pending against Ms. Gauri Parikh, that the agreement is not as per the norms, that before nominating the Council, its consent was not taken and lastly, that as per the Architects Act, 1972, only an architect registered with the Council or a partnership firm of architect can use the title and style of architect for practicing the profession.
9. Prima facie, I do not find that the grounds on which the Council refused to undertake the arbitration can be stated Page 7 of 11 HC-NIC Page 7 of 11 Created On Thu Apr 28 00:44:56 IST 2016 O/IAAP/10/2016 JUDGMENT to be valid. For example, mere pendency of the proceedings of alleged professional misconduct cannot disentitle a party from pursuing other legal remedies. However, since this order is not challenged before me, I need not express final opinion about the same. But short question is, in face of the arbitration agreement when the Council of Architecture refused to undertake arbitration for whatever grounds, would it be open for the petitioner to seek appointment of an arbitrator in terms of section 11 of the Act? Section 11 pertains to appointment of an arbitrator. Subsection(6) thereof which is relevant reads as under :
"(6) Where, under an appointment procedure agreed upon by the parties,
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment."
10. In terms of clause(c) of subsection(6) of Section 11 therefore, where under an appointment procedure agreed upon by the parties, a person including an institution, fails to perform any function entrusted to him, parties may Page 8 of 11 HC-NIC Page 8 of 11 Created On Thu Apr 28 00:44:56 IST 2016 O/IAAP/10/2016 JUDGMENT request the Supreme Court or as the case may be High Court or any other person or institution designated by such Court to take necessary measures, unless, the agreement provides other means for securing the appointment. Thus when the arbitration clause between the parties envisaged arbitration by Council of Architecture, who when approached by the petitioner failed to undertake such arbitration, in terms of section 11(6)(c), the petitioner had a right to seek appointment of arbitrator. What has to be seen is the intention of the parties namely, not to resort to Court proceedings in case of dispute instead to resolve the same through arbitration.
11. In case of Om Construction Company v. Ahmedabad Municipal Corporation and another reported in (2009) 2 Supreme Court Cases 486, the arbitration clause envisaged arbitration by the Arbitral Tribunal constituted under the Act. However, as per the provisions contained in the Act the Arbitral Tribunal had no jurisdiction to entertain such arbitration proceedings. In such a situation, the Supreme Court held that what is to be seen is the intention between the parties to resort to arbitration and even though the arbitration clause referred to the Tribunal which had no jurisdiction to entertain such a proceeding, it would be appropriate to appoint an arbitrator by the Court.
12. Coming to the question of agreement dated 4.7.2012, the same would not prevent the petitioner from seeking arbitration. Firstly, it is not clear whether the parties had acted upon such an agreement. The contention that GNLU Page 9 of 11 HC-NIC Page 9 of 11 Created On Thu Apr 28 00:44:56 IST 2016 O/IAAP/10/2016 JUDGMENT had tendered the payment of Rs. 51 lakhs which the petitioner did not accept is not found in any correspondence or pleadings. More importantly, when it is not clear whether the parties had by way of full and final settlement given up all its claims, it would always be safer and appropriate to allow such disputes be resolved by the arbitrator instead of refusing to appoint an arbitrator.
13. The contention that the petitioner has not demonstrated any cause of action also cannot be accepted. In the notice dated 22.6.2015 issued by the petitioner to GNLU, several disputes have been raised. Rejecting the claim on the ground that the petitioner has no case would amount to entering into merits of the case, which is simply not open for me to do.
14. The last contention that under the agreement dated 4.7.2012, there was a novatio of the original agreement totally giving up the arbitration proceedings, cannot be accepted. Even if the existence of the agreement dated 4.7.2012 and parties acting upon the same is believed, it nowhere provides for completely rewriting or giving up of terms and conditions of the original agreement.
15. In case of Walter Bau AG Legal Successor of the Original Contractor, Dyckerhoff and Widmann A.G. (supra), the issue was entirely different. The parties to the agreement had appointed an arbitrator contrary to the procedure envisaged in the arbitration clause in the agreement between the parties. It was in this background observed by the Supreme Court that unless such Page 10 of 11 HC-NIC Page 10 of 11 Created On Thu Apr 28 00:44:56 IST 2016 O/IAAP/10/2016 JUDGMENT appointment is valid, merely because appointment is made, would not bar the Court from exercising jurisdiction under section 11(6) of the Act.
16. The decision in case of Larsen and Toubro Limited v. Mohanlal Harbans Lal Bhayana reported in (2015) 2 Supreme Court Cases 461, was rendered in different factual background. In the said case, there was a new agreement executed between the parties giving up the old arbitration clause in the procedure for appointment of arbitration contained in the original agreement and the parties had also acted upon in terms of the new agreement. It was in this background held that the parties then cannot invoke the original agreement for appointment of arbitrator.
17. Under the circumstances, the parties shall present the declaration of Shri D.A. Mehta, retired judge of this Court, by the next date of hearing.
S.O. to 29.4.2016.
(AKIL KURESHI, J.) raghu Page 11 of 11 HC-NIC Page 11 of 11 Created On Thu Apr 28 00:44:56 IST 2016